Correlation Between General Mills and Meiji Holdings

Can any of the company-specific risk be diversified away by investing in both General Mills and Meiji Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining General Mills and Meiji Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Mills and Meiji Holdings Co, you can compare the effects of market volatilities on General Mills and Meiji Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in General Mills with a short position of Meiji Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and Meiji Holdings.

Diversification Opportunities for General Mills and Meiji Holdings

-0.36

Correlation Coefficient

General Mills  Meiji Holdings

Very good diversification

The 3 months correlation between General and Meiji is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Meiji Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiji Holdings and General Mills is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Mills are associated (or correlated) with Meiji Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiji Holdings has no effect on the direction of General Mills i.e., General Mills and Meiji Holdings go up and down completely randomly.

Pair Corralation between General Mills and Meiji Holdings

Considering the 90-day investment horizon General Mills is expected to generate 6.49 times less return on investment than Meiji Holdings. But when comparing it to its historical volatility, General Mills is 1.57 times less risky than Meiji Holdings. It trades about 0.04 of its potential returns per unit of risk. Meiji Holdings Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,072  in Meiji Holdings Co on February 2, 2024 and sell it today you would earn a total of  78.00  from holding Meiji Holdings Co or generate 7.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Mills  vs.  Meiji Holdings Co

General Mills

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, General Mills may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Meiji Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meiji Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with General Mills and Meiji Holdings

The main advantage of trading using opposite General Mills and Meiji Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills position performs unexpectedly, Meiji Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Meiji Holdings will offset losses from the drop in Meiji Holdings' long position.

The idea behind General Mills and Meiji Holdings Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.